Giant Consumer Products (Case Study Sample)

Title: Giant Consumer Products
Marketing
Name
Institution
Date of submission
Question One.
Giant consumer products Chief executive officer is more concerned about the downfall of trade promotion. From his own experience at GCP and Safeway he believes trade promotions are the least understood marketing tool deployed by manufacturers. Furthermore it is most expensive hence affecting the decision to either field a national sales promotion or not.
Trade promotion can cheapen a brand therefore the need to pull back on promotion. If promotion results to promoting an item and its sales volume increase at the expense of another (cannibalization), it’s disadvantageous to field a sales promotion. Also if a ‘price off’ deal on a super-premium brand results to tarnishing the premium image (brand equity erosion) it’s costly to carry out sales promotion.
In addition retailers determine whether national sales promotion will be successful or not. If retailers purchase large quantity of product while available at a lower price- to -retailer (forward buying) and raise the price – to - consumer back to regular price level after promotion period and pocket the difference the benefits of sales promotion will be in vain. Retailers can also sell the products at a lower PTC beyond the intended period thereby condition the consumers to expect the brands are on deal impacting negatively on future sales. Retailers can also be a threat if they receive products at a discounted PTR and fail to pass along the savings to consumers via discounted PTC (non-compliance with pass through) hence making trade promotions ineffective.
Lastly consumers’ behaviour impacts on product promotion. If they purchase large quantities and store for future use (stockpiling), any reduction in prices in the near future will not boost sales volume.
Question two.
Sanchez should run a national sales promotion because of its potential effects which include market growth, stock piling and brand switching.
Marketing margin change from promotion associated with running D32 is 718,986 and D16 is (526,946) hence promotion of D32 results to market growth
Within brand cannibalization effects of promotion is illustrated as follows:
Total brand impact from promotion on top line revenue is (1,197,278) for D32 while D16 is 2,775,637. Furthermore, the total brand impact from promotion on marketing margin is (4,646,753) for D32 and (2,496,224) for D16.
ROMI gives the profit for each promotion choice and is calculated by the formula below;
ROMI = incremental profits (net cost of promotion) / cost of promotion.
Cost of promotion is given by: variable cost change + promotion cost change
Incremental profits for running D32 promotion is given by ROMI × cost of promotion from the formula. 19.1 %{ 2,425,219+3,756,824) = 1,180,770 before cannibalization and -123.7 %{ 2,425,219+3,756,824} = (7,647,187) after cannibalization.
Incremental pro...